Eddie and Jo Ellen Allen have their very own housing crisis

This article is the latest in an ongoing series by R. Scott Moxley which includes "God Bless America""Red, White, and Pissed Off""Patriot Games" in the Oct. 26 - Nov. 1 issue, and "With Friends Like These" in the the Nov. 9 - 15 issue. In the three months since a federal bankruptcy judge ruled that her husband used patriotism, religion and political connections to defraud elderly Republicans out of millions of dollars, Jo Ellen Allen's life appears unchanged. Several investors testified that Jo Ellen vouched for Eddie's honesty and his phony military and business credentials. But the Southern California Edison spokesperson and Republican Party official continues to attend political functions, where she fires up God-and-country conservatives. And she still shows up a few times a month at KOCE, where she offers news commentary on the Huntington Beach public TV station. You'd know her: she emerges from a Lincoln Town Car wearing a 1950s-style shampoo-set hairdo and an expensive knit suit. Her sparkling blue eyes are outmatched only by the American-flag lapel pin she invariably wears.

"I think Jo Ellen is in denial. She acts as if she's done nothing wrong," says Jon Illingworth, a 59-year-old retired Tustin resident who Eddie defrauded for $40,000. "Far from apologizing and trying to make amends, the Allens claim they are the victims. They've never taken any responsibility for all the people they have hurt."

But if Jo Ellen's public life is toothy smiles and Fallwellian political pronouncements, her private life is a Gothic nightmare. On Nov. 9, Washington Mutual Bank foreclosed on her $1 million home at 21 Carmel Bay in Corona del Mar, driving the Allens onto the street. According to court records, Jo Ellen stopped paying their mortgage, community-association dues and property taxes almost a year ago. At the same time, the Allens were in a nasty legal fight with the lawyer who was supposed to represent Eddie in his appeal of the bankruptcy judge's Sept. 6 decision.

The Allens' housing crisis dates back 10 years. In February 1992, they fled another Corona del Mar home, still owing their landlord $14,000 in rent. They settled in a posh Santa Ana mansion so that Jo Ellen could run for a state Assembly post there. Though there's no evidence they paid rent, that home has its own remarkable history: the Allens' landlord was Stephen Wagner, a Newport-Mesa school official arrested that same year on charges he bilked the district out of $4 million. He pleaded guilty, was convicted and died of AIDS in prison in 1995.

Jo Ellen lost the Assembly race and, in a move that suggests her relocation to Santa Ana was purely political, began the hunt for a new home—in the very Corona del Mar neighborhood the Allens had abandoned the year before. In 1993, she and Eddie settled on 21 Carmel Bay, a three-bedroom ranch-style house on a hill overlooking Newport Harbor and the Pacific. Its 1993 purchase price: $695,000. Money wasn't hard to come by: court records show that Eddie had just conned more than $580,000 out of Doris Lach, an elderly Florida woman. Nevertheless, the Allens persuaded William Thrash, the former owner, to finance their purchase.

Early on, the couple missed several house payments to Thrash. A retired four-star Marine Corps general, Thrash now lives in Hilton Head, South Carolina. And though his troubles with the Allens occurred almost a decade ago, he recalls them vividly. Three years after they bought the house, the couple began having trouble paying the mortgage. Thrash was forced to threaten foreclosure several times in 1996 before the Allens cobbled together a collection of loans from banks and friends to pay him off. "The worst day of my life was the day I met Eddie Allen," Thrash says.

Their troubles with Thrash would suggest a cash-flow problem in the Allen household. But court documents show the couple lived a lavish lifestyle, shopped at expensive Newport Beach boutiques, drove luxury cars and took frequent "business" trips. They dined often at the Balboa Bay Club, which Eddie once told a business associate he partially owned. He doesn't. Eddie's autobiographical stretchers didn't stop there: several investors say Eddie got their confidence—and their money—by deceitfully posing as an affluent Harvard-educated attorney, Wall Street financial genius, and key CIA spy who advised Republican presidents and had been tortured while a prisoner of war in Vietnam.

Eddie's cons produced a swelling—and litigious—army of enraged creditors. Surrounded on all sides, Eddie moved quickly to shelter the only asset he would admit to owning—the home at 21 Carmel Bay. To keep the house beyond the reach of his creditors, Eddie surrendered full title to Jo Ellen in February 1996; she immediately wrapped the house in a cumbersome series of mortgages that drained it of all equity. One year later, Eddie declared personal and corporate bankruptcies.

The Allens don't just have trouble with houses; they also have trouble with lawyers—especially, perhaps, their own.

A centerpiece of Eddie's bankruptcy trial was Eddie's claim that he had been a valuable Vietnam-era CIA agent. Eddie told prospective investors he had been captured by the Viet Cong, tortured and rescued thanks only to the personal intervention of Henry Kissinger or Major General Richard Secord, depending on which version Eddie told.

But when the issue came up at trial, Allen clammed up. He said he couldn't bring any supporting witnesses to his own defense, that describing his 1963 mission in Vietnam would, 37 years later, endanger other agents. For more than two years, Allen and his attorney, Ted Albert, had asserted they would offer irrefutable proof of the military heroism. It never came. Instead, in early 2000, creditors attorney William Kennon brought to trial a string of top-ranking CIA and military officials and agents. Each participated in the missions Eddie claimed were his; each denounced Eddie in unvarnished terms. "If he [Eddie] did what he claims, I would have known about it," says Air Force Brigadier General Harry C. Aderholt, a colorful CIA officer and fighter pilot who served in World War II, Korea and Vietnam. "I told the judge that Allen was a lying son of a bitch who has no conscience. He should be court-martialed."

Eddie insisted Aderholt and the others were lying. He told federal judge Robert Alberts he could name men who would verify his participation in top-secret Vietnam missions but only in a session closed to the public. A tape of that April 2000 session since unsealed reveals that Allen's allegedly top-secret names were widely available in books one can find on the shelves of any Barnes & Noble.

Immediately after that disastrous session, citing a disagreement with his client, Allen's attorney dropped the case.

Allen then turned to Irvine attorney Jeanne M. Rowzee. She may be a very good lawyer; it's clear Rowzee is a smart businesswoman. Court documents in the matter of Allen vs. Rowzee show that attorney and client worked out a deal to fund Rowzee's work in the bankruptcy case—a deal involving the house at 21 Carmel Bay.

Eddie found M&G Property Management, a Bellflower firm willing to float Jo Ellen a $100,000 loan for litigation. In exchange, the Allens would offer as collateral Jo Ellen's house. It's hard to imagine why M&G would gamble on a couple with the Allens' record of bad debt, bankruptcy and stiffed landlords or why it would accept as collateral a home already entangled in loans to myriad other lenders, including Southern California Edison Credit Union and Washington Mutual Bank. Several phone calls to M&G went unanswered.

But this much is clear: on Oct. 24, 2000, Jo Ellen executed a note for $100,000 secured by the home at 21 Carmel Bay. Following an agreement drafted and signed by Eddie, M&G's cash went directly to Rowzee; following that same agreement, Rowzee cut Jo Ellen a check for $25,000 with the understanding that those funds were reserved for litigation.

For the last two months of 2000, the sun smiled upon the Rowzee-Allen-M&G relationship. Eddie sent his $1,000 December payment to M&G with a note: "Thank you for your help."

But in January, court documents show, the relationship soured. Eddie and Jo Ellen stopped paying M&G, and Eddie introduced a new interpretation of his financial arrangements with Rowzee. In a Jan. 26, 2001, memo to the lawyer, Eddie wrote that Rowzee should deposit $75,000 in unspent funds from the M&G loan to "our bank account and [allow the Allens to] pay you as required."

That same day, Rowzee fired back in a manner that shows she understood Eddie Allen too well. "For reasons that are too numerous to go into here, the funds for your legal representation should NOT at any time be in your bank account," Rowzee wrote. "Moreover, I am requesting at this time an accounting of the $25,000 transferred to you that was earmarked for expenses in this case: from my perspective, I fear that funds have long ago been spent on expenses unrelated to this case. For instance, the trip to Thailand that you claimed so desperately to need."

Their harsh January 2001 exchange set the tone for the Allen-Rowzee relationship. A month later, the trial phase of Eddie's bankruptcy case wrapped up. Seven months after that, on Sept. 6, the judge issued his stinging rebuke: "This court finds that Allen was not a colonel in the U.S. Air Force; he was not shot down, captured and held prisoner during the war in Southeast Asia; he is not a Harvard-educated attorney or, for that matter, an attorney at all; and he was not the very successful, wealthy and astute businessman portrayed. Plaintiffs justifiably relied upon such misrepresentations when investing."

Because of his fraudulent presentations, the judge said, Eddie was "not entitled to the economic fresh start afforded to honest debtors under the [bankruptcy] code." Eddie owed creditors $1.5 million in that case alone. Two additional Eddie Allen corporate bankruptcies are being litigated now.

Sept. 6 was a dark day for Eddie and Jo Ellen. On the day the judge issued his blistering conclusion, the Newport Beach-Costa Mesa Daily Pilot ran a legal advertisement in which M&G fulfilled its legal obligation to give the Allens more bad news: "YOU ARE IN DEFAULT UNDER A DEED OF TRUST. . . . UNLESS YOU TAKE ACTION TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE." Three weeks later, M&G pushed the house at 21 Carmel Bay into a foreclosure sale. A day after that, on Sept. 28, M&G won the deed to the house.

The situation was grim. But the Allens fought a guerrilla war worthy of the Viet Cong who Eddie claimed tormented him. In that war, they had powerful allies, including Newport Beach attorney Donald Segretti. A convicted co-conspirator in the Watergate trials, Segretti helped the Allens file a request for a temporary injunction against M&G. Though a judge refused the motion, the September filings make for remarkable reading. Eddie continues to lean on his age (he's 70) and still plays the bogus Vietnam-combat card. Jo Ellen's complaints are more interesting. Declaring herself "shocked," she asserted without irony that she and her husband had fallen into the hands of "another unscrupulous lawyer." Looking forward to a long legal battle with M&G and her husband's attorney, Jo Ellen claimed "the emotional and financial harm that we will suffer if we are forced out of our home will be inconceivable."

On Oct. 5, almost a year after making their last mortgage, tax and homeowners-association payments, Eddie and Jo Ellen were still in the home. On the front door, M&G had posted a "Three Day Notice to Quit," giving the Allens 72 hours to pack their things and leave. Process servers turned up at 21 Carmel Bay again and again—between 6:30 a.m. and 6 p.m. on several different days. They reported that the Allens were inside the home but refused to come to the door. They eventually served Segretti.

Three weeks later, M&G doggedly filed suit against the Allens; a day later, Segretti filed a cross complaint against M&G and Rowzee, alleging they defrauded the Allens.

Then the ax fell. It was one thing to fight a paper battle with a mom-and-pop lender; but on Nov. 9, huge Washington Mutual Bank—which owns the first deed of trust—moved in to claim its right to the home. By then, the Allens had moved out, leaving an empty house with a sweeping view of the Pacific Ocean, some rusting lawn furniture, and a forlorn American flag hanging like a rag in the courtyard out front.

Surrender is never total with the Allens, though. They always bounce back higher. Like George and Louise Jefferson of the 1970s sitcom, they've moved on up—literally. Their new home, a 2,800-square-foot condo, is several streets up in the same Spy Glass Hill area of Corona del Mar, in a gated and guarded community called Harbor Ridge, overlooking their old neighborhood. They don't own it, but it's home. For now.